Regulating Health

3/9/2010 | Brian Koenig

[briankoe]

Health care regulation is the worst form of tax, as it confiscates wealth and prevents effective drugs and treatments—that save lives and comfort terminal patients—from entering the market. Regulation isolates competition, limits market activity, and politicizes industries, all of which afflict consumerism and restrict individual liberty. Regulation confines industry and accepts the status quo, by constraining production and discouraging innovation and development. Regulation weakens economies and corrupts society, and for American health care, it has disparaged industrial progress and escalated costs to unprecedented levels.

Christopher Conover of Duke University noted the social costs of regulation across 47 health care categories. In defining social costs as “the value of the goods and services lost by society resulting from the use of resources to comply with and implement the regulation, and from reductions in output” , Conover estimated that in 2002, health care regulation cost taxpayers $169 billion. “Spread across all households, health services regulation cost the average household an estimated $1,546 in 2002.” This is more than Americans spent on both gasoline ($165.8 billion) and pharmaceuticals ($162.4 billion).

Government heavily regulates insurance providers, by placing restrictions on pricing, administration, and agreement terms. Pricing regulation expels actuarial science by preventing underwriters from assessing premiums based on risk. This may appear equitable, but in fact creates an ethical dilemma, as it forces low-risk customers to subsidize high-risk customers.

To regulate pricing in this way means someone who postpones buying health insurance for 20 years, and is suddenly diagnosed with heart disease, pays the same premiums as a healthy person who has carried insurance their whole life. Providers must offset their premiums to compensate for price controls, and low-income and low-risk individuals are denied insurance, because premiums are no longer affordable. It’s not compassion, but common sense that shows why this is unfair. In the quest for social justice, in theory, regulators produce a result that is unjust.